We Shall Soon Overcome Current Economic Crisis – John Kumah

Because the current economic challenges are temporary and would soon pass, Dr. John Kumah, the Deputy Minister of Finance, has pleaded with Ghanaians to have patience with the Akufo-Addo administration.

According to the Deputy Minister, also Member of Parliament for Ejisu, “Government is undertaking a comprehensive debt treatment program (domestic and external) to address debt sustainability concerns, reduce the fiscal deficit and create fiscal space for the budget”.

He explained that “the Government has been working hard to deal with the current economic challenges we face and very soon we will all start reaping the benefits of our collective efforts”.

In a post on his Facebook wall, Dr. Kumah explained that so far the Government has fully assessed the current economic challenges facing the country and put in place a comprehensive program such as; Post-COVID-19 Programme for Economic Growth (PC-PEG), among others to establish the sustainable macro-fiscal path.

Debt Treatment Programme

On the Domestic Debt Exchange, he said this is part of a comprehensive agenda to restore debt sustainability and support fiscal stability efforts in line with the PC-PEG/
, as it remains vital to unlocking the much-needed IMF-supported Programme.

He continues that this program aims to alleviate the debt burden in a most transparent, efficient, and expedited manner while minimizing its impact on investors holding government bonds.

On the DDEP, he said it has been crafted to address the specific concerns of the different categories of holders, including; Category A- Collective Investment Schemes and Natural Persons below the age of 59, Category B- Natural persons 59 years old or older, and finally general Category Holders- representing all other holders except Category A and B.

He added that DDE is a Voluntary exchange backed by an Exchange Memorandum. It covers locally issued bonds and notes of Government, ESLA Plc, and Daakye Plc bonds.

“Under the exchange, holders are requested to exchange their existing bonds for new ones with new terms per the various categories”, adding that “the exchange will have a significant positive impact on domestic interest payments and also budget deficit projections” he noted.

Additionally, to restore debt sustainability and macroeconomic stability underpinned by key structural reforms and social protection, also impending Fund Programme will significantly support the PC-PEG and will bring creditability and confidence to Government’s fiscal policymaking.

He said the measures will also provide funding assurance by Bilateral and Multilateral Partners to Government; support the structural reform agenda, as well as tackle the economic challenges through; Fiscal Consolidation; Debt Treatment Programme; and Structural reforms.

Fiscal Consolidation

He noted that in 2022, the government introduced a raft of fiscal and monetary measures to rein in expenditures and improve revenue mobilization, including a cut in discretionary spending, a cut in the salaries of the executives, freeze on foreign travel, among others.

In addition to that the 2023 budget indicates the government’s desire to continue with the fiscal consolidation efforts and reduce the fiscal deficit in line with the pending IMF Programme.

He said Government expects to record one of the lowest deficits this year, much lower than the GH¢64.0 billion announced in the 2023 budget.

Expenditure measures

Dr. KumDrexplains that the government is undertaking key expenditure measures which are; a reduction in the threshold on earmarked funds from the current 25% of Tax Revenue to 17.5% of Tax Revenues and migrating all earmarked funds onto the GIFMIS platforms and ensuring they use the GIFMIS platform to process all their revenue and expenditure transactions.

He added that Government has also cut down 30% of the salaries of the President, Vice President, Ministers, Deputy Ministers, MMDCEs, and political office holders, including those in State-Owned Enterprises.

“Review of government flagship programs, Place a cap on salary adjustment of SOEs to be lower than negotiated base pay increase on Single Spine Salary Structure for each year; Negotiate public sector wage adjustments within the context of burden-sharing, productivity, and ability to pay;
Managing public sector hiring within budgetary constraints is all part of the moves to strengthen the economy.

He added that others are a reduction in fuel allocations to Political Appointees and heads of MDAs, MMDAs, and SOEs by 50%, and a ban on the use of V8s or its equivalent, except for cross-country travel. All government vehicles would have to use GV number plates from January 2023”.

Also “Only essential official foreign travel across government, including SOEs, shall be allowed. As far as possible, meetings and workshops should be held within the official environment or government facilities; Reduction in the size of all convoys; A freeze on tax waivers for foreign companies while tax exemptions for companies in the free zone will be reviewed, including mining, oil and gas companies, A freeze on recruitment into the civil and public service, except in very critical cases; and Moratorium on the creation of new government agencies in 2023, and All non-critical projects that can wait for a year be suspended”.
Revenue Measures

Key Revenue Measures Undertaken

He also explained that the government is also undertaking key revenue measures such as; leveraging technology to enhance tax administration, identify and register taxable persons and improve tax compliance.

“Value Added Tax (VAT) rate revised by two and a half percentage points from 12.5% to 15%; benchmark discount fully phased out; Electronic Transfer Levy reviewed; Sale of 5G Electromagnetic Spectrum in consideration; Enhance Rent Tax Compliance; Pursue Additional Oil Entitlement (AEO) about the Jubilee Field; and revised Income Tax to exclude unrealized exchange losses from deductions and ensure that realized exchange losses on capital assets are capitalized.

Structural Reforms

Among the structural reforms being undertaken, he explained that full implementation of Section 88 (2) (b) of the PFM by all Covered Entities to improve accountability and transparency; implement and monitor measures for the effective management of public resources; closing the revenue mobilization gap, accurately assessing tax liability, and improve tax audit functions; Strengthening Internal Audit function in MDAs; restructuring of the Internal Audit Agency; and Expenditure commitment & Procurement control.

Others are to increase Domestic revenue from 13% to 18% in the medium term comparable to Ghana’s peers; and Alignment with Ghana’s National Digitalization Programme.
Other factors ( Gold Reserves, IMF Support, Gold For Oil program).

“These new initiatives by Government and the IMF program will reduce the pressure on our reserves and improve Ghana’s balance of payment, leading to a reduction in budget deficit”. He added.

Dr KumDradded that the Government has demonstrated its commitment to fiscal consolidation and structural reforms through the raft of measures being implemented.

“Support for the DDEP will further strengthen the good efforts to restore debt sustainability and ensure macro stability. Ultimately, implementing these measures would lead to a reduction in fiscal deficit” he urged the public